If oil prices keep rising, Govt will have to act: Montek

OIL IS WELL: The Deputy Chairperson of Planning Commission defends fuel price rise.

        

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Karan Thapar: So you waited to be sure that you needed to monetarily tighten the economy before you acted. Do you think you waited too long?

Montek Singh Ahluwalia: No, I don't think so. I think these are judgement calls that you have to the Reserve Bank of India. Let's make one important point. You talk about one important point. You talk about economic management. If India were the only country having an upsurge of inflation you could say that we were doing something wrong. The fact is all countries are experiencing this upsurge. What you are seeing in India is much better than elsewhere. The measure of monetary management is are we handling it according to best practice. I think we are.

Karan Thapar: I understand what you are saying. The problem is do you carry conviction with the people of India. The question people of India ask is how is that a government that has Manmohan Singh, P Chidambaram and Montek Singh Ahluwalia—the dream team as they call it—has messed up in this way. Instead of coming up with dream solutions you are suggesting nightmares.

Montek Singh Ahluwalia:That is the problem. You are putting so much emphasis on so-called dream solutions. What you need to know about the economy is you have got a four-year track record of rapid growth which is spread very widely. For the first time in 10 years you have got an agriculture performance that is picking up. You have got social schemes which are putting money into the hands of the poor and yes you have got an increase in inflation in the last six months. It's a global increase.

Karan Thapar: But you have got something worse. Despite all the very obvious positives you have suggested, you don't have a feel-good factor. As the ‘Business Standard’ wrote last week, instead you have a feel-bad factor. The country believes the economy is out of control; that the inflation is raging. Worst still manufacturing and industrial production might be slowing down. There is even concern that we could be caught in some sort of stagflation. So instead of feeling good and confident, the country is diffident, hesitant and worried. Confidence in the government is diminishing.

Montek Singh Ahluwalia: I think it is something we need to explain to the country better.

Karan Thapar: Is there a communication problem?

Montek Singh Ahluwalia: It is always is a communication problem because you are responding to new concerns. Nobody is describing India as a case of stagflation. Most people think India was growing very rapidly, it faced a huge increase in oil prices like every other country and it slowed down. I think it is important for the media to understand that slowing down from 9.6 per cent is not being lost or adrift or an economy in stagnation.

Karan Thapar: But if the economy is growing at 9 per cent, then why are not people feeling richer? Why are they not feeling happier? Why are they not feeling more secure? Why are they instead worried about prices? Why are they instead worried about their future?

Montek Singh Ahluwalia: Because you spend one second talking about the positives and then you are spending 10 seconds about them being worried.

Karan Thapar: Are you blaming the Press for the fact that your message is not getting across?

Montek Singh Ahluwalia: No. I recognise there is a change in the external circumstances which immediately leads people to focus on the problem. But remember there is a difference between a problem that is the result of something that happens domestically and a problem that is the result of what is happening externally.